Farmington Schools Budget Forecast: $13.5 Million Shortfall

Although she stressed that the numbers were very preliminary, Farmington Public Schools Executive Director of Business Mary Reynolds delivered grim news Tuesday about the district's 2012-13 budget. 

Anticipating flat state revenues, skyrocketing retirement costs and the loss of one-time state funding that helped offset those costs, Reynolds predicts a $13.5 million budget shortfall next year. And this comes, she said, even after the closing of four schools, painful concessions from district staff and proactive efforts to reduce districtwide energy costs. 

"This is the first blush of where we think things will be," Reynolds told officials during a 7:30 p.m. study session at the . "The numbers are a tool at this point. I would hope we can come up with some better numbers as the year progresses."

Enrollment is expected to drop by 260 students next year, although the district lost fewer students than expected this year. The state of Michigan has indicated per-pupil revenues will remain the same for 2011-2012, but Reynolds emphasized that the number is subject to change, as the state has its own budget to balance. 

Of the district's $2.9 million in increased expenditures next year, she said, $2.5 million is in retirement costs. The district pays 27.36 percent of employee compensation to the state retirement fund. The state provided help last year when the district's contribution rose from 24.46 percent to the current level. Any future assistance, Reynolds said, would come with "strings attached," likely tied to student achievement. 

Currently, the district's fund balance is just 5.7 percent of its overall expenditures, which is significantly below the policy target of 8 percent to 12 percent.

"We need to carefully assess what we do moving forward," Reynolds said. "Our No. 1 priority is the education of our students. Once we've spent our fund balance, it becomes very difficult to maintain going forward." 

Board member Priscilla Brouillette pointed out that benefit costs were also increasing by 10 percent, as they did this year. 

"We're just getting clobbered in areas we can't control," she said. 

Superintendent Sue Zurvalec said districts across the state are facing the same increases in retirement and benefit costs. During the past several years, the district has actually reduced expenditures by $14 million, she added. 

Officials did get some good news. Adjustments to the 2011-12 budget will result in $1.8 million less taken from this year's fund balance than officials expected when they approved the budget in June. While revenues dropped by $1.2 million, expenditures were reduced by $3 million.

Reynolds said the budget was passed before the impacts of negotiated employee concessions, student counts and other items were known.